The owner of Royal Mail is facing a near £900m class action claim over accusations it abused its “dominant position” in the market for sending out bulk mail, including bank statements and weekly magazines.
International Distribution Services (IDS) has been served with an £878m action by a newly formed company that said it represents an estimated 290,000 customers who claim they were overcharged as a result of Royal Mail’s behaviour.
Bulk mail is typically sent by businesses and organisations including retailers, utility companies, charities and publishers. It includes council tax and bank statements, charity fundraising appeals, weekly magazines and energy bills.
The action, brought by Bulk Mail Claim Limited, argues that businesses and organisations that bought bulk mail services after 2014 suffered owing to “anti-competitive” behaviour by Royal Mail. It argues that Royal Mail prevented competition, pushing up prices for the collection, sorting and delivery of letters in bulk.
The class action comes as the billionaire Czech energy tycoon Daniel Křetínský’s EP Group attempts to buy IDS in a £3.57bn deal.
In 2018, the industry regulator, Ofcom, fined Royal Mail £50m after it found the company “broke the law by abusing its dominant position in bulk mail delivery”. Ofcom said “Royal Mail’s behaviour was unacceptable and it denied postal users the potential benefits that come from effective competition”.
Royal Mail has unsuccessfully attempted to appeal against Ofcom’s decision. It faces a £600m claim, separate from the class action, brought by Whistl, which scaled back its operations in 2015 with the loss of 2,000 jobs. That case is expected to reach the high court next year.
Robin Aaronson of Bulk Mail Claim Ltd said: “Where there has been an abuse of dominant position, as has occurred in this case, it is important that those suffering loss are able to obtain redress.
“A collective claim is the only fair and efficient form of redress in this case, given that there are hundreds of thousands of affected customers and it would be commercially unviable for them to bring individual proceedings.”
Andrew Wanambwa, a partner at Lewis Silkin, the law firm aiding the claimants, said: “Royal Mail abused its dominant position, resulting in hundreds of thousands of bulk mail customers being overcharged. The purpose of this claim is to hold Royal Mail accountable for its actions and secure compensation for affected customers.”
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Royal Mail said: “We confirm that we have received an application for a collective proceedings order from an entity called Bulk Mail Claim Ltd which we consider to be without merit and we will defend it robustly.”
The class action claim has been filed with the UK Competition Appeal Tribunal.